Hewlett-Packard

  • 13 May 2008 at 3:43 PM
  • Banks

Hewlett-Packard & EDS Deal Puts Lehman and JP Morgan At The Head Of The Tech M&A League Tables

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The $13.25 billion acquisition of Electronic Data Systems by Hewlett-Packard—the ninth largest tech deal ever, according to DealLogic—has moved the M&A league table standings, DealJournal Heidi Moore reports. Before the deal was announced, Goldman Sachs and Morgan Stanley led this year’s ranking from advising technology companies on mergers. But neither bank has a role in the H-P deal, pushing them down in the rankings
“Goldman ranked first with $14 billion of announced deals to its credit this year, and Morgan Stanley ranked second with $11 billion according to investment-banking research provider Dealogic,” Moore writes. “But now, Goldman is in third place, displaced by Lehman Brothers and J.P. Morgan. Lehman has jumped from fifth to first place with $17 billion of deals to its credit, while J.P. Morgan — which, just yesterday, languished in seventh place with only about $2.2 billion of tech deals to its credit — has vaulted to second place in the rankings from seventh place. Morgan Stanley has fallen to No. 5.”
Citigroup and Evercore Partners advised Electronic Data on the deal. J.P. Morgan Chase and Lehman Brothers advised Hewlett-Packard.
Hewlett-Packard: The Advisers [Deal Journal]

Hewlett-Packard: Spying, Spying and More Spying

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hewlettpackardcorporatespyingpretexting.jpgHewlett-Packard wants to be the tech-company of the future and, unfortunately, that goal may be coming a reality in a way they never planned. Instead of becoming a shining star of new technologies, the company has been plagued by an association with a darker kind of future—a sort of Max Headroom, Robocop-style dystopian future where corporations employ spies to steal confidential, personal and corporate information about competitors, employees and reporters.
The pretexting scandal that led to the departure of the chairman of Hewlett Packard’s board of directors, resignations by senior executives, humiliating public hearings on Capitol Hill and a lawsuit brought by the state of California is by now well known. (A recap: H-P apparently engaged private detectives—to snoop into alleged leaks to the press that seemed to come from board members—who used false pretenses to obtain the phone records of board members and reporters, possibly breaking the law in the process.) This morning, however, Fortune writer Nicholas Varchaver, breaks the news that Hewlett-Packard’s spying may have started long before that famous episode. And, disturbingly, his reporting suggests that the pretexting that made headlines last year might not be the anomaly Hewlett-Packard chief executive Mark Hurd claimed it was.
[After the jump, the nasty lawsuit and the new claims of possible pretexting.)

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Who Put The Bee In Tom Perkins Bonnet?

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tom_perkinsmemoir.jpgWhen we read the report in the San Jose Mercury News on Tuesday that venture capitalist and former Hewlett-Packard board member Tom Perkins was making pointed remarks about corporate governance—including some fierce jabs at former H-P board chair Pattie Dunn—we all thought: why bring this up now?
After all, Tom won this fight last year, right? Pattie lost her position at the head of the board table, then had to leave the board altogether. She became a “fallen” or “disgraced” “former corporate leader.” Her name became synonymous with corporate scandal, and especially pretexting. She was indicted by the California attorney general. She even got cancer. Isn’t it time to leave Pattie in peace? Even DealBreaker hadn’t picked on “Pattie Cakes” for months.
So why now? We thought maybe it was the book. Tom’s got his memoirs coming out soon. Maybe he wants the publicity. It sounds a bit cheap to drag a sick, unemployed and indicted woman’s shame back before the public just to sell a few more copies of a book. Especially when you are already rich enough to afford a $100 million yacht. Does Tom Perkins really need to worry about whether his book sells?
Today the Wall Street Journal‘s editorial page runs the full text of the speech that was reported earlier in the Mercury News. And there’s one line that might shed some light on why Tom is dragging out the whole H-P thing again instead of sailing around the South Pacific.

And so, when the “wet kiss” Cnet.com article about how great Mark Hurd was at strategy appeared, Ms. Fiorina and I agree that Ms. Dunn launched the now infamous “Kona” spying investigation aimed at ridding the board of those directors (the tech committee) most familiar with strategy, whom Pattie assumed were the “evil” leakers. All this is documented in a characteristically long-winded New Yorker article of Feb. 19.

That’s right! It was the New Yorker! And it’s long-windedness!
Of course, we have no idea what Tom’s talking about because, let’s face it, it was the New Yorker. That’s the magazine that’s read by people who want to appear brainy but don’t really want to be bothered with doing stuff like learning very much. But we’ll check it out and report back.
See how far we’ll go for you? We’ll even read the New Yorker!

The ‘Compliance’ Board [Wall Street Journal]

The Costs of Compliance: Too Few Geeks

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tom_perkinsmemoir.jpgWe’ve noted before that the faddish devotion to compliance-oriented corporate governance—encouraged by everything and everyone from Sarbanes-Oxley, it’s attendant regulatory schema, some of the more opinionated-parts of the business press and the reigning corporate governance gurus—has serious costs that are all too often ignored. The whole corporate-spying pretexting scandal at Hewlett-Packard was probably the public example of this.
Now Tom Perkins, a veteran from the HP wars, has made his first public remarks since the scandal and directed them at exactly this problem. According to Perkins, too many corporate board members are so obsessed with compliance that they don’t know much about the company on whose board they are serving. He draws a useful distinction between two-types of directors–the guidance geeks who understand the business and the compliance nerds who understand legal rules and regulations.
The San Jose Mercury News reports:

During his 35-minute talk, Perkins outlined two kinds of board members, placing himself in the category of an old-style venture capital-type who is extremely involved in the business. He called that type a “guidance director.”
In contrast is the new emerging director, whom he called the “compliance director.” He described that person as someone increasingly focused on Sarbanes-Oxley requirements, who jumps from company board to company board, dispensing and heeding advice from consultants and lawyers.
Perkins, 75, derided the latter, which he called a “plug-to-plug compatible director” who believes he or she is equally capable of serving on a bank board as on that of a technology behemoth such as HP.

And Perkins thinks things are only getting worse. The compliance nerds are beating out the guidance geeks.

But today, he said, with too few “geeks” on its board, HP has evolved fully into a compliance board, “possibly untroubled by worries about technology and marketing strategy.”
“I think the guidance board will vanish and it will be replaced by compliance boards who just listen to lawyers and consultants,” he said, referring to the general corporate trend.

Ex-HP director laments corporate board trend [Mercury News]

We Realize the Venn Diagram Overlap Of People Who Work On Wall Street and People Who Watch The Super Bowl Is Rather Insignificant, But, For The Few Of You Out There…

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Those who were planning to bet big money online in regards to the outcome of the Super Bowl were served a sizeable setback over the weekend. But, assuming they also earmarked some clams for more “legal” pursuits, and play the bullish side of the market, there shouldn’t be too much to shed tears over.* According to the Super Bowl Stock Indicator, when an old NFL team wins, the Dow Jones average goes up.

The indicator has been correct following 31 of the 40 Super Bowls, wrong five times and was inconclusive four times (but more on that later). Even counting the inconclusive readings, that’s about a 78 percent success rate. Dropping the inconclusive years from the equation results lifts the success rate near 89 percent.
The Bears facing the Colts marks the seventh time that two old NFL teams have faced off in the big game. The six previous times that’s happened, the Dow has gone up every time, posting an average gain of 18 percent.

And if doesn’t go up, consider one point scored for Super-Bowl-Day-Spousal-Abuse. Either way, you’ve got a winner.
NFL’s biggest winner: Bulls, not bears [CNN Money]
*Not that you guys would ever “shed tears,” but, you know, whatever the testosterone-driven equivalent of letting salty discharge come out of your eyes is.

Larry Sonsini Ousted As H-P Board’s Ouside Counsel

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The pretexting scandal claims another victim, Silicon Valley super lawyer Larry Sonsini. This won’t come as a surprise to anyone who watch Sonsini at the Congressional hearings earlier this year, where he came off as at least a bit evasive. Particularly frustrating was the fact that he seemed to be giving board members advice based on the legal work of Hewlett-Packard’s general counsel. Kind of makes you wonder what part of outside counsel Sonsini didn’t understand.

After the resignation, Mr. Sonsini, in his role as outside counsel, immediately interviewed Mr. Perkins. But he did not find that Mr. Perkins had resigned because of a disagreement with the company, which would have prompted the board to disclose the circumstances to the Securities and Exchange Commission. That has prompted an S.E.C. investigation.
Mr. Perkins also alerted the board to the use of pretexting, calling it illegal. In a response, Mr. Sonsini told him that the pretexting was “within legal limits,” though that opinion turned out to be based on the advice of the H. P. lawyer, now facing charges, who in turn had received the opinion from a Boston lawyer sharing an office with one of H. P.’s private investigators.
The Sonsini firm in late August interviewed people involved in the spying, as well as Mark V. Hurd, the company chairman and chief executive, and concluded again that nothing illegal had occurred. In early September, the company filed a statement to the S.E.C. disclosing the pretexting and stating that it was “not generally unlawful.”
A Congressional subcommittee asked Mr. Sonsini to testify during its investigation of the spying. He was called to testify alongside Ms. Dunn and had to sit in the witness seat for more than five hours, though she got the brunt of the queries. He defended his law firm’s work during the hearing and said that he considered pretexting to be unethical and improper.


H.P. Board Cuts Its Ties With Lawyer

Tom Perkins Memoir: “Valley Boy”

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tom_perkinsmemoir.jpgTom Perkins, the former Hewlett-Packard board member who helped expose the spying scandal that rocked the company and unseated its chairman earlier this year, has agreed to write a memoir that will provide details of the H-P affair.
From Keith Kelly’s column in the Post:

The memoir is entitled “Valley Boy: The Education of Tom Perkins,” and will appear under the Gotham imprint.
It begins with his stormy resignation from H-P in May 2006, shortly after the board learned that then-Chairman Patricia Dunn had conducted a lengthy spying operation on the company’s own board members to learn who was leaking stories to the press.
Perkins, a board member at Post parent company News Corp., went to authorities after he discovered that he had also been the subject of unauthorized surveillance by Dunn, which triggered the scandal that forced her to step down.

H-P Insider Scores A Tech-Tell Memoir [New York Post]

DealBreaker Of the Year Candidate: Patricia Dunn

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Sponsored by Winning: The Answers: Confronting 74 of the Toughest Questions in Business Today – the ultimate stocking-stuffer.


click here Our second candidate for DealBreaker of the Year might be a bit unexpected choice—former Hewlett Packard board chairman Patricia Dunn. Just today news broke that Hewlett Packard will have to pay $14.5 million to settle the civil case stemming from the spying scandal that resulted in Patti Cakes stepping down. But the DealBreaker of the Year award is beyond good and evil. Sometimes the world of finance is moved by the forces of light and sometimes by the forces of darkness. This year, Pattie Cakes clearly claimed her place in American corporate history, on the front pages of the business sections and, certainly, all over DealBreaker.
The pretexting story is now very well-known. At least one member of the board of directors of Hewlett Packard was leaking information to the press. The board investigated but the leaks persisted. A second round of investigations was authorized by Dunn, and that’s when the trouble started. The investigators charged with finding the leak lied to telephone companies to obtain the phone records of board members and journalists, and when news of this kind of corporate spying broke, America was scandalized. Hearings on Capitol Hill were called, criminal charges were filed, heads rolled. Dunn’s now jobless and facing possible jail time while she attempts to deal with cancer.
But long before she became known as Pretexting Pattie, Dunn was regarded as one of the woman the most accomplished and powerful women in corporate America. There may yet be more chapters to be written in this American life.
In many ways, Dunn’s story is tragic because she did so many things right. Well, if not right, then according to the books—she was a true believer in the reigning ideology of corporate governance and it was this zeal that was her undoing. This would have been a very different year if not for Patricia Dunn, which is why we’ve made her a candidate for DealBreaker of the Year.
PattieDunn3.jpgValue Added: Other than the pretexting misstep, Dunn’s tenure at the head of Hewlett Packard’s board is considered exemplary. Her downfall also helped teach us two important lessons. First, that there is something wrong with the process-obsessed view of corporate governance. Second, by falling so publicly while Hewlett Packard’s stock continued to climb, we learned that corporate boards may be even less relevant than we thought.
Risk Factors: Dunn’s insistence that she didn’t do anything wrong struck us as, well, a little bit scary. It seemed so far removed from reality. She never seemed to get how frustrating or even insulting her testimony about the pretexting affair was. She gave the impression that no-one had ever challenged her authority. Being in love might mean never having to say you’re sorry. Being the chairman of the board certainly does not.
Should Pattie Cakes be the DealBreaker of the Year? Well, she’s only the second candidate we’ve named (the first was Hank Paulson), so this might be premature. But we invite you to let loose with your inner-most feelings in the comments section below. And if you want to nominate other candidates, please feel free to email us at tips@dealbreaks in Business Todayer.com. (If you can use the format we’ve laid out above, all the better. If it’s a hassle, we’ll take ‘em as we get ‘em.) If we use your nomination, you’ll get a free copy of Winning: The Answers: Confronting 74 of the Toughest Question.
Read More About Patrica Dunn:
Patricia Dunn Archives [DealBreaker]
Hewlett Packard Archives [DealBreaker]
Wikipedia Entry [Wikipedia]

Mr. Hot Stock Tip Giver-Outer

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The rest of America is either sleeping off their Thanksgiving hangovers or pushing their way into a mall to grab those holiday shopping discounts. But you’re rubbing the sleep out of your eyes while staring at a glowing screen. Well, you’re not alone. We’re here with you too today. And we’ll do our best to keep you entertained, and maybe even informed.
But lets start with entertained part. Here’s a quick audio clip of a Bud Light commercial honor “Real Men of Genius.” In this case, it honors that guy with the hot stock tips.
Mr. Hot Stock Tip Giver-Outer [The Rad Reporter]

Liquid Lunch: Carly Fiorina Discusses Tough Choices With Sir Harold Evans At Le Cirque

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hosted by the venerable Week
180px-Harold_Evans.jpgCarlyFiorina.jpg
Let’s just cut to the chase—I’m in love with Harold Evans. And had I been given more than 20 minutes’ notice that I was going to be in his delicious presence, I might have stood out among the suits in more of a tastefully displayed cleavage way and in less of a “I shop at American Apparel” way.
Evans begins to read a passage from the book about the board telling everyone that Fiorina’s leaving because of “personal reasons, to spend more time with her family,” etc, and then gives the audience what I swear to God is a come hither look and paraphrases with, “basically a bunch of bull shit.” I’m sitting within maybe 10 inches of him, and if I thought it wouldn’t distract the audience from the conversation at hand, I would reach over, place a hand on his forearm and mouth, “I love you.”
Fiorina waxes on about the H-P takeover of Compaq for about six minutes; very articulate and all but you’d have to have a really deep interest in H-P and/or Compaq to not start hearing “If you like pina coladas…gettin’ caught in the rain…if you’re not into yoga…if you have half a brain” 90 seconds in. Evans interjects—“I’ve been involved in some takeovers myself; mostly on the receiving end.” I laugh and toss my hair over my shoulder—he knows what that means.

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Pattie Pleads Not Guilty

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PattieDunn3.jpgWe don’t know whether Pattie Dunn wasn’t offered a bargain or just decided she wasn’t pleaing out. We hope it’s the latter, and that she’s taking the Dick Grasso “clear my name under any costs” road. Because that trial will be totally awesome.
From the Associated Press:

Former Hewlett-Packard Chairwoman Patricia Dunn has pleaded not guilty to four felony identity theft and fraud charges.
It’s alleged that she instigated the company’s ill-fated spying probe into boardroom leaks.
Dunn appeared briefly for her arraignment in Santa Clara County Superior Court.
Dunn was released on her own recognizance after a lawyer entered the plea for her.
The 53-year-old Dunn is one of five people charged in the technology giant’s efforts to unmask board members who discussed company business with reporters.
Investigators used a shady ruse known as “pretexting” to obtain the confidential phone logs of directors, reporters and others to trace the source of the leaks.

[One more quick note: shady ruse? That's pretty hip lingo for the kids over at the Associated Press. ]
[Oh, wait, another note: We're thinking of calling Pattie "Cakes" from now on. As part of our new "arbitrary nicknaming policy." But let us know if you've got a better idea.]

Former H-P chairwoman Dunn pleads not guilty [Associated Press]